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How Much Does the U.S. Government Subsidize Electricity Generating Technologies?

graphic link to the landing page for The Full Cost of Electricity

Exactly what is a subsidy, who pays for them, and who benefits? Everybody in the energy business has an opinion but few people agree on any one answer. The American Petroleum Institute, an oil and gas trade association, offers a fact sheet arguing that their industry isn’t subsidized; the Nuclear Energy Institute offers an analysis that reaches contrary conclusions. Renewables either receive disproportionate largess or are underfunded, depending on whom you ask.

While these questions incite cross-talk, not cross-tabulation. But we elected to do the latter as part of a comprehensive, interdisciplinary research project called the Full Cost of Electricity (FCe-) conducted by the University of Texas at Austin Energy Institute. Our analysis of energy subsidies aims to estimate the magnitude of federal financial support offered to various electricity supply chains and technologies—gas turbines, nuclear power plants, wind turbines—from mine-mouth to wall socket.

Over the period 2010 to 2019, we identified 76 programs worth US $11 billion to $18 billion per year that met our criteria for intentionality, selectivity/preferentiality, and the potential for wealth transfer. Bottom line? In total dollars, the fossil fuel industry receives benefits comparable to that for the renewables industry, but when considering only the portion of fossil fuel support that relates to electric power, renewables receive far more support.

Different technologies benefit from different kinds of financial support, a complex arrangement that lends itself to calculations that tell only part of the story. Renewable generation is supported by direct subsidies (money for electricity) while generation from fossil fuels is supported via indirect subsidies (tax preferences on fuel production). Some would argue that subsidies need to be narrowly defined as transactional, à la money for electricity. We disagree.

Both types of subsidies reduce costs for generators—albeit in different ways. Renewables-focused subsidies like the Production Tax Credit and the Investment Tax Credit offer clear benefit to wind and solar. But tax preferences for the oil and gas industry can also alter the economics of electricity generation—for example, making fuel for natural gas power plants less expensive than it would be otherwise. Importantly, the complex nature of energy consumption means that some subsidies support electricity generators as well as transportation, home heating, and petrochemicals.

While subsidies spending on conventional technologies and renewables is commensurate today, renewables spending is forecast to accelerate. Ongoing spending for renewables is forecast to rise from $3.5 billion in 2010 to more than $10 billion in 2019. “Shovel ready” jobs and one-off rebate programs provided as part of the American Recovery and Reinvestment Act of 2009 (an Obama era stimulus bill) added billions more in temporary funding.

Chart shows Total Spending on Electricity by Fuel and Year
Image: UT Austin
Total Spending on Electricity by Fuel and Year, US millions of dollars, nominal

On an energy basis, wind and solar receive orders of magnitude more support than their conventionally fueled brethren (see chart below). Depending on the year, conventional technologies receive less than $2 per megawatt-hour. By contrast, wind received $57/MWh in 2010, falling to $15/MWh over our study period. Astonishingly, solar support stood at $876/MWh in 2010 but is expected to decline to $70/MWh by 2019.

All in, electricity technologies receive financial support worth $3–5/MWh. That works out to $30 to $60 per capita. The reason we estimate such relatively high financial support for wind and solar on a megawatt-hour basis (and that declines rapidly over time) is that we divide annual spending by annual generation for each fuel and technology as an “industry,” that is, not lifetime spending on a project divided by lifetime megawatt-hours from a project.

The figures for total support and support-per megawatt-hour tell very different stories. That’s the point. At the end of the day, you get what you measure, and in the case of energy subsidies, what you measure varies a lot.

Our hope isn’t to tell people what measurement is best, or what subsidies are good or bad. As with our white paper and journal article that provide a fresh take on levelized cost of electricity (LCOE), our goal is to provide a standardized benchmark to compare subsidies across the energy space as they relate to electricity.

For details of inclusion criteria, evaluation methods, and calculations, read the complete white paper “Federal Financial Support for Electricity Generation Technologies,” prepared by the University of Texas Austin Energy Institute.

Carey W. King is the assistant director and a research scientist at the University of Texas at Austin Energy Institute. Ben Griffiths is a student researcher in Energy and Earth Resources at the Jackson School of Geosciences, University of Texas. 

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Not only could rechargeable zinc-based batteries possibly store as much energy as lithium-ion batteries, they could also be safer, cheaper, smaller and lighter, new research finds. The results suggest zinc batteries could find use in mild hybrids (microhybrids), electric vehicles, electric bicycles, and eventually, perhaps smartphones and power grid storage.

The researchers are now aggressively testing these batteries and exploring scaling up this technology. “We feel we can have a battery ready for the market by the end of 2019,” says Michael Burz, CEO of energy technology firm EnZinc in San Anselmo, Calif., which helped engineer the new batteries.

When it comes to electric vehicles, the new batteries will “be 30 to 50 percent cheaper than comparable lithium-ion systems,” Burz says.

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Facing Threats, Nukes Work to Polish Their Green Cred

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The 838-megawatt, single-unit boiling water reactor has produced power for more than 40 years. But a year ago, it seemed that FitzPatrick’s days were numbered. Single-unit nukes like FitzPatrick can be expensive to run because they lack the economies of scale available to larger multi-unit plants.

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One in 10 people today still lack access to safe drinking water, according to the World Health Organization. Almost half of the people getting water from unprotected sources live in sub-Saharan Africa, and eight in 10 live in rural areas.

Many of these countries can’t afford the cost of desalination even if they are near large water bodies. Systems that use meshes or canvas to harvest fog are used in some developing regions, but they require relatively high humidity.

The new device traps moisture at 20 percent relative humidity, which is the level common in arid areas and deserts of the world. Researchers at the University of California, Berkeley and MIT reported in the journal Science that their prototype was able to pull 2.8 liters of water from the air over a 12-hour period in experiments done at 20 percent humidity and simulated sunlight. Rooftop tests confirmed that it works in real-world conditions.

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Hydrostor Is Building Underground Caverns for Affordable Compressed-Air Energy Storage

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The system comes in at “half the cost of competing battery technologies, and on part with new natural gas plants,” the company claims.

The case for storing large quantities of electrical energy is getting stronger and stronger, whether to expand the use of solar and wind power or to meet surges in demand on the grid. Batteries are making headway for energy storage, but compressed-air energy storage (CAES) is a strong contender. Such systems use off-peak electricity to run compressors and store the compressed air, which can later be expanded to drive a turbine.

CAES systems have the potential to cost less and last longer once they have been built. The problem with conventional CAES is that it is expensive and requires underground geological formations to store the air.

In 2014, Hydrostor introduced plans to pack compressed air into large bags submerged underwater, with the idea of storing energy from offshore wind farms. Their latest system, called Terra, stores compressed air in an underground cavern built to operate at low and constant pressure.

The cavern has to be connected to a local water body via a pipe so that water can enter and leave the cavern as air goes out and in. The water in the shaft and cavity helps keep the air under constant pressure. To improve efficiency, Hydrostor uses an adiabatic design, in which the heat generated during compression is removed via heat exchangers and stored in a volume of water, and then, in turn, used to heat the air when it is expanded to drive the turbine.

The company’s design offers two key advantages over traditional CAES systems. It does not require special geological formations and can be built at any site close to a body of water, including urban areas. As a plus, it does not require natural gas to generate the heat for air expansion.

According to Hydrostor’s president and CEO Curtis VanWalleghem, the company is now “engaged with several utilities around the world to deploy systems rated at hundreds of megawatts.”

Hydrostor might have competition from a few other CAES startups looking to enter the market. SustainX in New Hampshire has demonstrated a full-scale system to store compressed air in pipes, while LightSail Energy plans to store air in steel tanks.

New Tool Helps African Countries Find the Best Sites for Renewable Energy Projects

Africa has the lowest per capita electricity consumption in the world, due in part to scarce power generation and transmission infrastructure.

By some estimates, demand in the Eastern Africa Power Pool (EAPP) and Southern African Power Pool (SAPP), which include more than 50 percent of the continent’s population, may exceed 1,000 terra-watt hours (TWh) by 2030, nearly three times 2010 electricity consumption. Much work needs to be done to supply that expected demand.

Some of that supply will come from East Africa’s signature wind project, the $680-million, 310-megawatt Lake Turkana Wind Power site in Kenya. Last month, workers installed the last of 350 850-kilowatt Vestas turbines. Engineered by Siemens, the wind farm will add the equivalent of around 18 percent of Kenya’s total installed generating capacity and could serve up to 1 million households.

But there’s a catch. The Lake Turkana project is so remote that it needs a 438-kilometer-long transmission line to deliver its power to population centers. The powerline is years late and was only about 60 percent complete in January, according to the power journal ESI Africa. The project has suffered delays due to community opposition, legal issues, environmental problems, and the World Bank’s decision to withdraw support in 2012. The government recently had to take over payment and procurement from Madrid-based Isolux.

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Photograph of President Trump shaking hand of hard-hat-wearing coal miner

Commentary: Photo Ops with Coal Miners Offer No Substitute for Fact-Based Climate Policy

President Donald Trump surrounded himself with coal miners at the EPA yesterday as he signed an executive order calling for a clean sweep of all federal policies hindering development of fossil fuel production in the United States. The order’s centerpiece is an instruction to federal agencies to cease defending the EPA’s Clean Power Plan and thus, according to Trump’s rhetoric, revive coal-fired power generation and the miners who fuel it.

The electric power sector, however, responded with polite dismissal. 

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The biggest Trump administration fallacy at work yesterday is its claim that climate change may not be primarily human-caused—the standard line on climate espoused by top GOP leaders in Congress and Trump administration officials such as EPA administrator Scott Pruitt and Secretary of State Rex Tillerson

This oft-repeated claim is scientifically indefensible, given multiple lines of evidence that indict rising levels of greenhouse gases such as CO2 and methane caused by fossil fuel combustion, cement production, deforestation, and other economic activities. This includes robust satellite observations showing that natural factors have had negligible impact since 1980. As NASA scientist Thorsten Markus reminded us recently, anthropogenic climate change is simply, “what the data show.”

Fallacy of the day goes, however, to the only research cited in defense of Trump’s order: a NERA Economic Consulting report from November 2015 suggesting that “40 states could have average retail electricity price increases of 10 percent or more” thanks to the Clean Power Plan.

EPA designed the Clean Power Plan to cut power sector carbon emissions by nearly one-third by 2030 by emphasizing renewable energy, natural gas, and energy efficiency and dialing back coal-fired power. President Trump sees “an out-of-control anti-energy agenda that has destroyed millions of jobs.” Most modeling, however, projects net economic gains from reduced use of coal, including health benefits and long-term savings for consumers.

World Resources Institute economist Noah Kaufman examined four power price projections in January, including the NERA report cited by Trump officials. Three of the studies project that electrical bills will be down in 2030, from 3 to 17 percent. Here’s Kaufman’s explanation for how NERA’s research, which was commissioned by a coal advocacy group, reached the opposite conclusion:

In every case, the study funded by the coal advocacy group used assumptions at or above the top of the range of expert forecasts or empirical estimates of the costs of clean energy available in late 2015 when the studies were conducted. In other words, the study assumed that the rapid advances in clean technologies like solar and wind energy prior to 2015 would not continue into the future, a hypothesis that has already been proven wrong.

Yesterday the electric power sector responded to Trump’s order by rejecting NERA’s negative view of renewable energy, as well as Trump’s fallacy-based fantasy that he can put coal miners back to work. “The sector plans to keep moving steadily toward a cleaner, more distributed energy future—no matter what happens with the Clean Power Plan,” reported UtilityDIVE, a mainstream business publication.

UtilityDIVE issued its annual survey of electric utility executives yesterday, concluding that rescinding the Clean Power Plan was unlikely to reverse coal’s fortunes “mostly due to the economics of natural gas and renewables.” Over two-thirds of executives surveyed expected their power mix over the coming decade would include modestly or significantly more wind power and 82 percent expected solar growth.

Only one in four executives expressed a desire for the federal government to abandon a decarbonization policy, while a majority—58 percent—called for additional measures beyond the Clean Power Plan. A national price on carbon, such as that which Canada is adopting, was the leading policy option.

UtilityDIVE’s big picture view was endorsed by dozens of state-level reports from such utilities as American Electric Power, which slashed its reliance on coal from 71 percent to 47 percent over the last two years. Based in Columbus, Ohio, AEP said it would continue to “balance out our portfolio with more natural gas and renewable generation,” according to local journal Columbus Business First. The journal added context by reminding readers of 10 natural gas plants under development in the state.

Duluth-based Minnesota Power told Michigan Public Radio that it would press on with plans to slash coal-fired generation in favor of wind and natural gas. That report provided context by noting local climate shifts meant “fewer pond hockey days, longer ragweed seasons, and heavier rainstorms that wreak havoc on farm fields, highways, and homes.”

The radio station also quoted the Republican chairman of the state’s House energy committee, Pat Garofalo, who dismissed Trump’s vow to put coal miners back to work. “The combination of wind and natural gas on price, pollution, and productivity are just trouncing every other energy source. And this executive order won’t change that.”

Further evidence of power sector resolve to reduce greenhouse gas emissions came from Carnegie Mellon University and equipment supplier Mitsubishi Hitachi Power Systems, which unveiled a novel index of power sector carbon intensity and plans for high-profile quarterly reporting. “We wanted to make sure that everyone understands how we’re doing,” explains Costa Samaras, an assistant professor of civil and environmental engineering at Carnegie Mellon.

How will all of this industry action on climate balance out against a hostile U.S. administration? Let’s take that up by correcting one more fallacy at work yesterday—one not from the Trump camp but built into yesterday’s coverage in the New York Times.

The Times ably reported on the near impossibility that the executive order would revive coal in the United States. It overreached, however, in this damning prediction for U.S. climate action: “Mr. Trump’s order signals that the United States will not meet its pledges under the Paris deal to cut its emissions about 26 percent from 2005 levels by 2025.” 

Experts contacted by IEEE Spectrum yesterday question the Times’ prognostication. “I wouldn’t be that definitive,” says David Waskow, director of WRI’s international climate program. Waskow says Trump’s attack will make it “much harder and more costly” for the U.S. to deliver its share of climate progress. But he said the price of renewable energy continues to drop, and states and businesses may compensate for federal inaction. 

“It’s like you’ve got a runner on a track and now there’s somebody on the side of the track throwing obstacles in the way. It makes it harder but the runner is continuing in the right direction,” says Waskow.

Samaras agrees. “Most of the action climate-wise is going to be at the states and at companies. That was the case yesterday and that’s going to be the case tomorrow,” says Samaras. He expects to see “a little” slowing of U.S. grid decarbonization, but says there is a “good chance” that the U.S. will meet its Paris pledge, barring an unforeseen steep rise in the cost of natural gas.

A return to the pricey natural gas of decades past appears unlikely. Why? Thanks to President Trump and GOP efforts to ease federal restrictions on gas production

Coal miners should read the fine print on the President’s executive order. While Trump’s coal-boosting boasts grabbed yesterday’s headlines, his order calls for “particular attention to oil, natural gas, coal, and nuclear energy resources.”

America’s dirtiest energy source is third in line, right behind natural gas.

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graphic link to the landing page for The Full Cost of Electricity

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